In a 36-page opinion that reads like a scholarly law review article on the Texas Citizen Participation Act (TCPA), the Tyler Court of Appeals has allowed certain claims based on fraud brought by Heisman Trophy winner and NFL Hall of Fame running back Earl Campbell and former Baltimore Ravens cornerback Gary Baxter against Baylor Scott & White (BSW) to proceed over BSW’s motion to dismiss under the TCPA.
Baylor Scott & White v. Project Rose MSO, LLC, Touchdown Interception, LLC, Individually and Derivatively on behalf of 62 Roses, LLC (No. 12-20-00246-CV) arose from a high-profile business venture between Texas Spine and Joint Hospital (TSJ) and former NFL stars Campbell and Gary Baxter to establish a state-of-the-art sports science and medical facility at TSJ’s medical complex in Tyler. Campbell and Baxter created LLCs that in turn executed a Company Agreement with TSJ to form 62 Roses to operate the facility. Campbell and Baxter provided consulting and marketing services that attracted considerable public attention to the project in expectation of compensation once the facility went into operation. Just before it opened, Campbell and Baxter noticed that the facility’s logo had changed to include BSW. Subsequent investigation revealed that TSJ had sold a controlling portion of its interest in the venture to an entity with a controlling interest in BSW. TSJ then repudiated its agreement with 62 Roses without paying any consulting fees to Campbell and Baxter. When Baxter threatened to hold a press conference announcing that he and Campbell intended to sue, TSJ preemptively filed suit against them (i.e. 62 Roses) in Smith County district court alleging breach of contract, seeking a declaratory judgment that it had not breached the consulting agreement, and requesting to wind up 62 Roses’ business.
62 Roses filed a counterclaim against TSJ, BSW, and other defendants alleging numerous common law causes of action and seeking a declaratory judgment that the sale of TSJ’s interest in the facility was void under the Company Agreement. BSW filed a general denial and moved to dismiss 62 Roses’ counterclaim under the TCPA, alleging that the counterclaim was a communication based on BSW’s exercise of free speech. The trial court denied BSW’s TCPA motion. BSW filed an interlocutory appeal with the Tyler Court of Appeals. The parties agreed that the 2019 TCPA amendments applied to the dispute.
Chief Justice Worthen’s opinion is thorough, comprehensive, and learned. An attempt to summarize it in detail would be just as long as the opinion, however, so we will try to extract what we see as the most significant holdings and dicta. The threshold issue, of course, was whether the TCPA applied to the dispute in the first place. Justice Worthen had no difficulty finding that the counterclaim was “in response to” or “based on” allegations of conduct that fell within the TCPA’s protections. Noting that the 2019 amendments deleted the phrase “related to,” the opinion comments: “It is unclear how the removal of the ‘related to’ language affects this nexus requirement.” In this case, however, the court considered this part of the nexus satisfied regardless of the statutory change.
62 Roses then argued that its counterclaim arose from a private contract and did not involve a “matter of public concern” under the TCPA, citing SCOTX’s decision in Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC, 591 S.W.3d 127 (Tex. 2019). The court of appeals rejected this argument, commenting that SCOTX “left open the possibility that [private business disputes] may still implicate the TCPA as a matter of public concern if its subject matter otherwise falls within the TCPA’s definitional scope or when it has public relevance beyond the purely private interests of the parties involved in the dispute.” Here Chief Justice Worthen found that the counterclaim came under the TCPA because it involved prominent celebrities, the business venture was highly publicized and generated substantial community interest, and the purpose of the agreement was exploit Campbell’s and Baxter’s (and other NFL stars’) celebrity status to make the facility successful. Justice Worthen further determined that the counterclaims arose from communications between TSJ, BSW, and others that led to agreements that allegedly deprived 62 Roses of compensation. These agreements likewise involved a matter of public concern since they brought into question the viability of a project that had attracted so much public interest. Based on these facts, the court of appeals held that BSW demonstrated based on 62 Roses’ pleadings that “the communication had at least a tangential, remote, or tenuous relationship to a matter regarding the owners of Rose, who are public figures on a matter of public concern—namely the completion and operation of the world-class sports medicine and research facility, which did in fact generate considerable public interest through press and media coverage.”
Having crossed the TCPA applicability threshold, the court turned to 62 Roses’ contention that the TCPA’s fraud and misappropriation of trade secrets and corporate opportunities exemptions apply to the counterclaim. BSW conceded that 62 Roses’ common law fraud claim was exempt but contested the other causes of action. 62 Roses argued that because it made a common law fraud claim, the entire counterclaim was exempt. The court rejected this argument, holding that it must determine whether each individual cause of action falls within an exemption. Consequently, the opinion proceeded to take up each of the 12 causes of action pleaded in the counterclaim. At this point, Justice Worthen makes an important determination: the TCPA’S fraud exemption not only exempts a common law fraud claim itself, but any “legal action based on a common law fraud claim.” This reading means that derivative causes of action predicated upon fraud also fall within the exemption. Based on this interpretation of the statute, the court of appeals found that the fraud exemption likewise applied 62 Roses’ claims for unjust enrichment, civil conspiracy, and aiding or abetting breach of fiduciary duty. Thus 62 Roses did not need to make a prima facie showing on each element of the causes of action.
The court of appeals then turned to 62 Roses’ claims for unfair competition/unfair competition by misappropriation (i.e., common law misappropriation) and violations of the Texas Uniform Trade Secrets Act and Texas Theft Liability Act. 62 Roses argued that the TCPA exempted these claims as “arising from an officer-director, employee-employer, or independent contractor relationship that . . . seeks recovery for misappropriation of trade secrets or corporate opportunities” [§27.010(a)(5)(A), CPRC]. First, the court held that 62 Roses met the “independent contractor” prong by virtue of its consultant agreement with TSJ. Following an analysis of the law of unfair competition, the court of appeals concluded that the exemption applied to the misappropriation claims.
Several of 62 Roses’ claims, however, were not exempt from the TCPA: tortious interference with existing contract, promissory estoppel/detrimental reliance, quantum meruit, money had and received, and declaratory judgment. 62 Roses therefore had to make a prima facie showing of the essential elements of each cause of action in order to overcome BSW’s motion for dismissal. Recall that the statutory standard is “clear and specific evidence” of each essential element, meaning that the plaintiff “must provide enough detail to show the factual basis for its claim.” Here the court of appeals held that while the pleadings alone were insufficient to make the prima facie showing, the plaintiff need not present “the best evidence” to satisfy its burden. The court thus considered the pleadings, an unsworn declaration by Baxter, and various exhibits offered by 62 Roses, including an SEC 10-K report detailing BSW’s purchase of TSJ’s interest (this evidence appeared particularly damning to BSW’s argument that it should never have been in the lawsuit to begin with). Based on this evidence, the court ruled that 62 Roses satisfied the prima facie showing for its tortious interference claim, money had and received claim, and declaratory judgment claim. It likewise found that 62 Roses had established that some damages naturally flowed from BSW’s actions. The court, however, ruled against 62 Roses on its promissory estoppel and quantum meruit claims based on the absence of a direct relationship between BSW and 62 Roses.
The court of appeals remanded the case to the trial court for further proceedings. It did, however, find that BSW was entitled to some attorney’s fees under the TCPA because 62 Roses failed to satisfy its burden as to its promissory estoppel and quantum meruit claims. Thus the TCPA’s cost-shifting mechanism benefits a defendant even if the plaintiff prevails on the lion’s share of its TCPA burden. While this case may not break any new ground in TCPA jurisprudence generally, the scope of its extensive and nuanced discussion of the procedural and evidentiary requirements of the statute, the applicability of the statute (particularly its discussion of “matter of public concern” and what constitutes a “communication” under the TCPA), and exemptions from the statute make it required reading for lawyers on both sides. We have nothing but praise for Chief Justice Worthen and Justices Hoyle and Neeley for their careful, deliberate, and thoughtful work.